• #
      • CME-16-0562-BC
      • Effective Date
      • 22 June 2017
    • FILE NO.:



      Coastland Capital LLC


      Rule 538.C. Related Position

      The related position component of an EFRP must be the cash commodity underlying the Exchange contract or a by-product, a related product or an OTC derivative instrument of such commodity that has a reasonable degree of price correlation to the commodity underlying the Exchange contract. The related position component of an EFRP may not be a futures contract or an option on a futures contract.

      Each EFRP requires a bona fide transfer of ownership of the underlying asset between the parties or a bona fide, legally binding contract between the parties consistent with relevant market conventions for the particular related position transaction.

      The execution of an EFRP transaction may not be contingent upon the execution of another EFRP or related position transaction between the parties where the transactions result in the offset of the related position without the incurrence of market risk that is material in the context of the related position transactions.


      Pursuant to an offer of settlement in which Coastland Capital LLC (“Coastland”) neither admitted nor denied the rule violation upon which the penalty is based, on June 20, 2017, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on April 5, 2016, Coastland entered into an Exchange for Related Position (“EFRP”) whereby it purchased E-mini S&P 500 futures contracts and sold SPDR S&P 500 exchange-traded fund (“SPY”) contracts. Contemporaneous with this transaction, Coastland bought the SPY contracts and sold CBOE June 2016 2000 strike S&P 500 Index (“SPX”) Option Combos opposite the same counterparty. As a result, the related position in the EFRP transaction (the SPY contracts) was established and simultaneously offset without the incurrence of market risk. The Panel further found that the transaction was transitory in nature.

      The Panel concluded that Coastland thereby violated CME Rule 538.C.


      In accordance with the settlement offer, the Panel ordered Coastland to pay a fine of $15,000.


      June 22, 2017